If you’re a parent of a high school senior, chances are you have spent a significant amount of time helping your child navigate the college application process this year. It’s a demanding rite of passage that has been made more stressful than usual by COVID-19. Last year, almost every aspect of the college recruiting and admissions process was disrupted and that’s likely to be the case for part of 2021, as well.
Jenny Rickard, President of the Common Application (CA) told NPR, “Going back to March (2020), when you think about the pandemic really hitting at that moment, that's not only the time that colleges are sending out their admission decisions for that next fall, it's also the time that they're recruiting, you know, the next cycle of students…there weren't going to be spring college fairs for the juniors in high school. There weren't going to be visits from colleges to the high schools. Standardized tests were canceled.”1
Since so many students were unable to take standardized tests, the majority of colleges and universities are not requiring applicants for the 2021-22 school year to submit SAT or ACT test scores. In many cases, schools waiving the requirement received higher application volume than those that did not, reported InsideHigherEd.2
Pandemic-induced challenges, including online classes, appear to have taken a significant toll on 2020-21 college enrollment and 2021-22 college applications:
- Undergraduate enrollment was down 4.4 percent, year-to-year, for the Fall 2020 semester, according to data from the National Student Clearinghouse Research Center.3
- The CA received 8 percent fewer applications through early November 2020 than it did the previous year.2
- Sixty percent of the 900 or so college and university members of the CA reported receiving fewer applications through November 2020.2
- Schools in the Northeast and Midwest saw the biggest declines in application volume.2
- Public four-year institutions have seen a bigger drop (11 percent) than private four-year institutions (5 percent).2
- Applications from first-generation students and students who were eligible for application fee waivers dropped by 16 percent through November 2020.2
The good news for some students is a lower number of applications may make stretch schools more accessible.
College applications are declining, but college tuition isn’t.
Many colleges and universities froze tuition and fees for full-time undergraduate students for the 2020-21 school year. College Board’s Trends in College Pricing and Student Aid 2020 reported, overall, tuition and fees remained relatively unchanged compared to the prior year. For example, tuition and fees averaged $10,560 at public four-year, in-state institutions. That was about a 1 percent increase. Private four-year institutions raised tuition and fees by about 2 percent to $37,650. The remaining college expenses, which often constitute the majority of expenses for students, include room and board, books and supplies, transportation, and other items.4
If you’ve set aside ample funds in a college savings plan, you may not have to worry about how to pay for college. Unfortunately, that’s not the case for most people. Sallie Mae’s How America Pays for College 2020 report found most parents rely on a combination of income, savings, and loans to pay for college. Typically, college funding comes from:5
- Parent income and savings (44 percent)
- Scholarships (25 percent)
- Student borrowing (13 percent)
- Parent borrowing (8 percent)
- Student income and savings (8 percent)
- Relatives (1 percent)
More than one-third of families used a tax-advantaged college savings account, like a 529 plan account, to help pay for college during the 2019-20 school year.5
Don’t assume you won’t qualify for financial assistance.
Many families make the mistake of assuming they won’t qualify for financial assistance, so they don’t investigate the options available to them. Many scholarships and grants are available to students from all income brackets, including merit scholarships, community service grants, and aid for military families. Even high-income families may qualify for needs-based aid if they have multiple students in college.6, 7
The place to start is by completing the Free Application for Federal State Aid, also known as FAFSA. The information provided on FAFSA applications is the basis for financial aid decisions made by colleges, universities, and scholarship programs.8, 9
The number of FAFSA applications was down in 2020, too. “As of early December, the number of high school seniors nationally who had filed [FAFSA]…was down about 14 percent from this time last year,” reported The New York Times. With fewer students applying for aid, the chances for receiving financial assistance need may be higher.10
The deadline to complete FAFSFA is June 30, but many colleges and states offer aid on a first-come-first-serve basis.7
The pandemic has created a myriad of challenges for prospective college students and their families, including anxiety about finding the funds to pay for higher education. If you haven’t already, consider opening a 529 college savings plan account. Contributions are not federally tax deductible, but any earnings grow tax-deferred and distributions used to pay qualified college expenses are federally tax-free.11
You may also want to ask family and friends to make a contribution to the student’s college account as a high school graduation gift.
If you have any questions, please get in touch with us.
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AMJ Financial Wealth Management LLC is not affiliated with Triad Advisors LLC
The information provided for informational purposes only, and does not constitute an offer, solicitation, or recommendation to sell or an offer to buy securities, investment products or investment advisory services. All information, views, opinions, and estimates are subject to change or correction without notice. Nothing contained herein constitutes financial, legal, tax, or other advice. These opinions may not fit to your financial status, risk, and return preferences.
This material was prepared by Carson Coaching. Carson Coaching is not affiliated with the named broker/dealer or firm.
Prior to investing in a 529 Plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
This is not intended to be a substitute for specific individualized tax advice. We suggest you discuss your specific tax issue with a qualified tax advisor.